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Roth Vs. Simple

The major difference between a Roth IRA and a traditional IRA is how contributions to the retirement account are taxed. Contributions to a traditional IRA are not taxed until the money is withdrawn upon retirement. Contributions to a Roth IRA are taxed when made.

  1. Tax Deductibility Of Contributions

    • Contributions to a traditional IRA are tax deductible. Contributions to a Roth IRA are not deductible.

    Withdrawal Age

    • In a traditional IRA, the minimum withdrawal age is 59 1/2. In a Roth IRA, there is no minimum withdrawal age,

    Withdrawals Tax-Free

    • Direct contributions to a Roth IRA may be withdrawn tax-free at any time.

    Taxes Paid Upon Retirement

    • Withdrawals from a traditional IRA at retirement age are taxed at ordinary income tax rates.

    Considerations

    • A traditional IRA has no income eligibility requirements. Under a Roth IRA, the ability to make contributions is phased out at increased income levels

    Early Withdrawal Penalty

    • With a few exceptions, there is a 10% penalty for withdrawals from a traditional IRA prior to retirement age of 59 1/2.

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